The assessment year (AY) 2024-25 brings with it a renewed understanding of India’s evolving income tax structure. Taxpayers across the country, from salaried employees to self-employed professionals and senior citizens, must stay informed about applicable tax slabs to ensure accurate tax planning and compliance. As the government continues its push toward simplifying taxation and promoting voluntary compliance, the tax slab for AY 2024-25 reflects the policies introduced under both the old and new regimes. Understanding how these slabs apply, the differences between regimes, and the associated exemptions and deductions is crucial for optimizing one’s tax liability.
Overview of the Tax Regime Choices
Old Tax Regime vs. New Tax Regime
Starting from FY 2020-21, the Indian government introduced a new tax regime with lower tax rates but fewer exemptions and deductions. For the assessment year 2024-25, taxpayers can choose between the old regime, which allows various deductions (like Section 80C, 80D, HRA, LTA, etc.), and the new regime, which offers reduced rates but limits most exemptions.
The choice between these regimes depends on individual income levels, available exemptions, and investment declarations. A taxpayer with substantial deductions may still prefer the old regime, while someone with minimal claims may benefit more under the new structure.
New Tax Regime Slabs for AY 2024-25
Under the new tax regime applicable for AY 2024-25 (FY 2023-24), the following income tax slabs apply to individuals below 60 years, senior citizens, and very senior citizens alike:
- Up to ₹3,00,000: Nil
- ₹3,00,001 to ₹6,00,000: 5%
- ₹6,00,001 to ₹9,00,000: 10%
- ₹9,00,001 to ₹12,00,000: 15%
- ₹12,00,001 to ₹15,00,000: 20%
- Above ₹15,00,000: 30%
The new regime now offers a standard deduction of ₹50,000 for salaried and pensioners, which was initially only part of the old regime. Moreover, the rebate under Section 87A has been revised. If a taxpayer’s total income under the new regime does not exceed ₹7,00,000, a full tax rebate is available, making the effective tax liability zero.
Old Tax Regime Slabs for AY 2024-25
The old regime continues to be available for taxpayers who prefer to claim deductions and exemptions. The slab rates vary based on the age of the individual taxpayer.
For Individuals Below 60 Years
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
For Senior Citizens (60 to 80 Years)
- Up to ₹3,00,000: Nil
- ₹3,00,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
For Very Senior Citizens (Above 80 Years)
- Up to ₹5,00,000: Nil
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
Under the old tax regime, taxpayers can avail of multiple deductions such as:
- Section 80C: Up to ₹1.5 lakh for investments in PPF, EPF, ELSS, etc.
- Section 80D: For medical insurance premiums
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Standard Deduction of ₹50,000 for salaried individuals
Tax Rebate Under Section 87A
This rebate is crucial for individuals with lower taxable income. For AY 2024-25, under both regimes, taxpayers are eligible for a rebate up to ₹12,500 if their total income does not exceed a specific threshold.
- Old Regime: Up to ₹5,00,000
- New Regime: Up to ₹7,00,000
As a result, no tax is payable if the total income is within these thresholds after considering deductions and exemptions (if any).
Surcharge and Cess
In both tax regimes, surcharge is applicable on higher income brackets:
- 10% on income from ₹50 lakh to ₹1 crore
- 15% on income above ₹1 crore
- 25% on income above ₹2 crore (capped at 25% under the new regime)
In addition to the surcharge, a 4% health and education cess is applicable on the total tax amount (inclusive of surcharge).
Which Regime Should You Choose?
Factors to Consider
Choosing the right tax regime depends on various personal financial factors:
- Total income earned during the year
- Amount of deductions and exemptions available
- Type of employment or business
- Tax-saving investments and expenses
Taxpayers should calculate their net tax liability under both regimes and choose the one with the lower burden. Online tax calculators and consultation with a financial advisor can help in making an informed choice.
Examples of Comparison
For a salaried individual earning ₹10 lakh annually:
- Old Regime: If the taxpayer claims deductions of ₹2 lakh, the taxable income drops to ₹8 lakh. Tax payable will be lower when deductions are considered.
- New Regime: Without claiming any deductions (except standard deduction), tax is calculated at progressive slab rates, possibly resulting in higher liability if no investments are made.
Filing Income Tax Returns
Declaration of Regime Choice
Salaried taxpayers must declare their choice of regime to their employer at the beginning of the financial year. If no declaration is made, the new tax regime is considered by default. However, the final regime selection can still be changed while filing the income tax return (ITR).
Business and Professional Income
Taxpayers with income from business or profession can switch to the new regime only once. Subsequent reversals are not permitted unless they stop having business income. This makes the initial choice very significant for self-employed individuals and professionals.
The tax slab for AY 2024-25 reflects the government’s dual approach of simplifying tax compliance while offering flexibility to taxpayers. By understanding both the new and old regimes, individuals can better plan their taxes based on their income structure and financial goals. As income tax remains a significant component of personal finance, staying informed and proactive in choosing the right tax regime ensures compliance and savings. Whether one opts for deductions under the old system or the simplicity of the new regime, thoughtful comparison is key to making the most of the tax structure in the current assessment year.